• by Diane Mermigas , April 6, 2009

Jonathan Miller's appointment as chief digital officer at News Corp. underscores the retrenchment of big media, which will see more shifting assets, redefined leadership and new business models around evolving interactive applications. Eventually, all media will be new media.

Miller will wield enormous influence over News Corp.'s sprawling global footprint with a direct line to chairman CEO Rupert Murdoch and digital oversight of all its businesses. Miller has the acumen -- accumulated at Velocity Interactive, AOL and IAC -- to expand and establish a digital core to leverage and rejuvenate News Corp.'s struggling TV, newspaper and Internet operations.

The new CDO can be a catalyst for the transformative change at News Corp. that will be duplicated at companies across the media spectrum. Media's radical transformation will be defined by the spinoff and merger of assets, the monetization of social networks, the overhaul of advertising into interactive marketing, and the conversion of traditional print publishers and television networks into virtual content providers.

But plenty of potential obstacles remain.

It's too soon to know whether Miller will have the financial and management support necessary to revitalize and monetize MySpace and Fox Interactive Media. Can he salvage the MySpace's search pact with Google and invent lucrative commerce models? Even after posting a $6.4 billion loss last quarter in a massive writedown in asset values, News Corp. has $4.5 billion in cash to invest. It will take at least $50 million to revamp the MySpace platform, improve user engagement and make it more competitive with Facebook and Twitter. But Miller's toughest challenge may be to effectively manage horizontally across the vertical fiefdoms of News and Fox.

Then there is the matter of what some insiders characterize as the counterproductive meddling of MySpace founding CEO Chris DeWolfe if he does not leave News Corp. Even in Miller's first week on the job, MySpace was scrambling to bolster advertising and engagement off its 76 million active monthly user base with a Yahoo off-network partnership, plans for a branded email service, and a new participatory online game show called BFF. With social networking budgets declining, even the micro-blogging wonder Twitter and Facebook (trying to be more Twitter-like) are furiously innovating amid rumors that Google is interested in buying one of them.

Miller's impact will extend outside of News Corp. to working with co-owner NBC Universal to create sustainable, lucrative business models for Hulu.com, as it brings Disney into its online video mix. Even Google's YouTube, which dominates 41% of domestic video streams, could lose more than $600 million, according to new estimates from Credit Suisse analyst Spencer Wang. Monetization is a critical industry issue.

Furthermore, Miller could provide a common bond to facilitate an alliance or merger between News Corp.'s FIM and Time Warner's AOL, both of which are likely to be spun off.

Murdoch sought such a deal a year ago and Time Warner Chairman and CEO Jeff Bewkes has been anxious to jettison AOL, even if it means maintaining equity ownership in the stand-alone entity. An AOL spinoff would be a way of appeasing Google, which intends to cash out of its 5% stake in Time Warner by July, according to Citigroup analyst Jason Bazinet.

Google recently wrote down its $1 billion investment in 2006 to just $274 million, which now values AOL at $5.5 billion. Both Google and new AOL CEO Tim Armstrong (a former Google executive) could financially benefit from an AOL spinoff, whether it eventually merges with FIM or is flipped to Microsoft or Yahoo.

The start-ups that Miller and his partner Ross Levinsohn, former FIM CEO, have funded and nurtured could come into play. Velocity could provide equity funding to an FIM spinoff or merger, sources say.

Such deals will accelerate over the next 18 months as all companies become more focused, develop new metrics and business models, and reconfigure assets for digital revenues. For instance, all traditional print publishers and television networks will shed their legacy structures to flourish as digital content providers. Same-market newspapers, TV stations and radio will merge their newsgathering, community content and sales for digital distribution. Online content aggregators, led by Hulu.com and YouTube, also will consolidate. Newer players, such as Yahoo, are rethinking their business.

Before Carol Bartz took over as CEO, there was speculation that Yahoo would sell its search business to Microsoft, which would take an equity ownership position in a new company created by merging the remainder of Yahoo with AOL. Some on Wall Street believe it still could happen.

Time Warner already has downsized and refocused, and will use some of the $9 billion in proceeds from publicly spinning off its cable systems to acquire more cable networks. Debt-strapped Chairman and CEO Sumner Redstone could opt to convert CBS TV into a super cable network and wrap it and CBS Corp.'s other cable and Internet properties under the Viacom umbrella to better monetize his media holdings. Financially troubled General Electric could be prompted to sell NBC Universal, which could be a good match for Time Warner.

Chess moves involving Microsoft, AOL and News Corp. could trigger a stream of increased deals that will reset values and rearrange the media landscape. The $1.3 billion value of media, information, marketing and technology deals in the first quarter -- down 91% the prior year -- is the lowest in recent memory, according to Jordan Edmiston Group. Frozen credit, plunging advertiser spending, a lack of visibility and a wide valuation gap between buyers and sellers are to blame. However, Miller is among the new media architects who understand how to build value out of the chaos.

Murdoch recently indicated an interest in clamping down on Google search's infringement on copyright newspaper and magazine material and finding ways to charge for their Web content via a Kindle-like patented mobile newspaper reader. Miller's strength is having already participated in that new digital world of possibilities. "Jon has the opportunity to shape a vast and powerful digital domain," Levinsohn said of his friend last week -- and not just at News Corp.